Econ Sense: Coca Cola vs Pepsi, A Taste Test

One of the fiercest and most bitter rivalries in the history of business is the one between two beverage giants–Coke and Pepsi. This is due to the fact that the two companies are virtually targeting the same group of consumers. Consequently, one firm’s fortune is the other’s loss.

At the start of the rivalry, Coke had a clear edge over its rival Pepsi. Bolstered by a propitious beginning, the company was able to capture an overwhelming share of the soft drink market. Coke also made great inroads internationally; it was the default soft drink in many world markets.

But the tide began to turn in the 80s when Pepsi unleashed what was arguably the most ingenious marketing campaign in recent time–the Pepsi Challenge. Random people at various public venues were asked to participate in a taste test. Each participant was given two cups of soft drink, one contained Pepsi and the other contained Coke; the person was not informed which cola was in which cup. The results were overwhelming in Pepsi favor. The highly publicized affair was a great boost for the company; Pepsi has seen both its fortune and market share rising dramatically following the successful marketing campaign.

Yet, the results which favored Pepsi confound many people. One of the reasons why Coke did so much better at the beginning of the rivalry was the general consensus that the brand had better taste than Pepsi. There must be a reason why the formula for Coca Cola remains safely guarded in a secret vault somewhere (marketing strategy or what not) while the formula for Pepsi is in the public domain. Was the Pepsi Challenge a fraud? Is there an alternative explanation?

The people who participated in the Pepsi Challenge appeared to be authentic individuals; they were not paid actors. The test procedures appeared fair; no foul play was detected. One could not find any reason to discount the results.

Recently, some researchers started to reexamine the issue and offered a theory as to why the results were in Pepsi’s favor. The researchers re-conducted the taste tests using similar procedures and found the results were once again in Pepsi’s favor. Next, they conducted the same tests but used full glasses of Pepsi and Coke instead of small cups. The new results were unexpectedly in contrast of those of the previous tests; Coke was the clear winner this time. This begs the question. Why do the two sets of results contradict each other?

When taken in small douses, Pepsi was more preferred by the testers. This is due to the fact that Pepsi is sweeter than Coke. In the immediacy, the natural preference of most people is to pick the sweeter of the two colas. But when taken in full glasses, the fact that Pepsi is sweeter is actually its liability. The testers preferred Coke because it offers a less sugary taste.

Is it a coincidence that the Pepsi Challenge was set up in a way that gave Pepsi the edge? Absolutely not. The ‘challenge’ was a major part of Pepsi’s marketing campaign; the company would not have conducted the taste tests without knowing for certain that its product would come out on top. I bet this was done in purpose; the company probably already knew what the researchers later realized. This was a brilliant move in Pepsi’s part.

I want your opinion. Which cola (Coke, Pepsi, Dr. Pepper, ect..) do you prefer and why?

[The Author]
~~~